Southern California Office Real Estate Blog

SOCAL OFFICE REAL ESTATE SNAPSHOT – JULY 2010

July 1, 2010 on 7:43 pm | In Statistics, Trends, Uncategorized, all |

by Jodi Summers

Yup, it’s been confirmed again, the office sector will be stagnant for the rest of the year. The state “will grow slower than the US and a slow recovery in jobs will leave unemployment at 12.1% for the year,” notes UCLA Anderson senior economist Jerry Nickelsburg, in the midyear forecast.

Statistics confirm this. According to Clarus Market Metrics, comparing Jun-08 vs. Jun-10, the median price of for sale properties is down 14% in Los Angeles County. Yet, sellers do not quite understand the depth and breadth of the market drop, as the median price of sold properties for the same period is down 58%.

Sure, office building owners are whining, but things will look up. According to the Los Angeles County Economic Development Corporation, California’s unemployment rate dropped in May. Not a lot mind you, we dropped to 12.4% from 12.5% in April, but we’re moving in the right direction.

The L.A. County office building market can be proud that comparing Jun-08 vs. Jun-10, The number of sold properties is up 200% - from 1-3…whoopeee!

Additionally, three properties went under contract in June, compared with zero two years ago.

Think positive. Keep in mind, we also live and own in one of the most desirable cities in the world. As bad as the office sector may feel in the Los Angeles area, it can always be worse. According to CoStar.com, there are parts of the country like Lansing, MI, where commercial loans back more than 50 properties, and nearly 1 in 5 loans are in the process of defaulting. Heavily impacted commercial loan markets in metro areas like Las Vegas, Phoenix, Detroit, Orlando, Tampa and Atlanta all show probability of default ratios of 10% to 14% and loss severities on loans of 8.6% to 15.4%.

Los Angeles falls into the category of lucky megalopolises. Major metro areas - including Los Angeles, San Diego and Orange Counties - as well as Washington DC, Boston, New York and Seattle, show defaults and losses are running at less than 4%. In the stronger cities, distressed sales account for just 6% to 11% of the activity, according to the CoStar analysis.

“By and large, these distressed transactions have been in suburban submarkets,” observes Stephanie Hession, a real estate economist with CoStar Group. “Since the beginning of 2009, suburban assets accounted for 63% of total office sales volume but 75% of distressed volume.”

If you can stick it through this year, the future is looking bright. “The latter part of our forecast (through 2012) calls for health care, professional and business services, exports, construction and technology-related manufacturing sectors to generate a bit more robust growth in California,” optimistically concludes Nickelsburg, in the midyear Anderson Forecast.

We’re here to help you with commercial properties. Please contact Jodi Summers – jodi@jodisummers.com or 310.392.1211 for details.

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https://www.terradatum.com/agentmetricsonline/property_type_selection.td

http://www.edd.ca.gov/About_EDD/pdf/urate201006.pdf

http://www.globest.com/news/1684_1684/losangeles/300380-1.html?ET=globest:e22415:277110a:&st=email

http://www.laedc.org/eedge/index.html#1